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Private infrastructure markets have demonstrated remarkable resilience in the face of economic challenges. By the end of 2023, the core private infrastructure equity risk premium fell to 5.5%, down from a historical average of 7.0%.1 While the recent period of higher interest rates has squeezed activity across sectors, core infrastructure has shown greater resilience, buoyed by long-term capital structures that shield against market fluctuations.
A notable trend in recent years has been the consolidation and influx of non-traditional infrastructure players into the market. Prominent examples include the acquisition of Global Infrastructure Partners by Blackrock and other consolidations within the sector. The unlisted infrastructure asset class is increasingly concentrated among a small group of asset managers with mega-funds, spurred by record-breaking capital raises, including a single infrastructure Brookfield fund that secured $282 billion in 2023.
Private infrastructure M&A and fundraising remain closely linked, even though both have dropped 40%3 year-on-year. However, this decline is less severe compared to the steeper downturns seen in many other sectors within alternative space.
Digital Infrastructure and the Energy Transition lead investment trends
Digital infrastructure and energy transition themes continue to drive investment, particularly as data consumption, AI, and cloud computing expand globally. In the first half of 2024, 72%4 of digital infrastructure transactions involved data centers, underscoring the sub-sector’s growing importance. AI’s rising computational needs are further pushing demand.
However, powering these facilities presents a significant challenge. Amazon’s 1,200-acre data center5 campus, powered by a nearby nuclear power station, remains an exception. Most data centers face rising electricity demands and also mounting pressure to reduce their carbon footprints. This situation has led to more interest in renewable energy. Despite strong interest in renewables, performance across sub-sectors has been uneven. Wind energy deal flow in the first half of 2024 hit its lowest level in a decade, with only $21.5 billion in deals closed, compared to $42 billion in the same period in 2023. Contributing factors include rising labor costs, inflation, and permitting delays. Solar energy, in contrast, recorded $38 billion in deal value in the first half of 20246, continuing a positive trajectory.
Another significant challenge lies in the outdated and insufficient power grid infrastructure, particularly in Europe. The European Commission estimates that €584 billion7 of investment will be needed by 2030 to expand transmission and distribution networks across the European Union. A modern, decentralized grid will be crucial to support both the energy transition and the growth of digital infrastructure.
As global infrastructure markets adapt to evolving macroeconomic conditions, the sector’s inherent resilience, strengthened by the accelerating energy transition and digital transformation (including the role of AI in infrastructure projects), positions it for sustained growth. Despite ongoing challenges, infrastructure remains attractive to long-term investors seeking stable and reliable returns.
Summary
Despite uncertainty, the private infrastructure sector remains robust. Long-term capital structures, inflation hedging, and key growth areas like digital infrastructure and renewables position the sector for sustained investments.